While the end result of the cost-to-benefit analysis might, in all likelihood, mean layoffs of a chunk of its 7,000 employees–a larger number for its smaller operations.

And, after all, staff costs are one of the biggest line items in AOL’s budget–sources at the company said Armstrong will not rely on simply cutting jobs to craft a more attractive budget for its upcoming spinoff.

Still, there is obviously a lot of pressure on Armstrong to get the financials–which are still largely dependent on AOL’s declining, but money-generating, access business–looking pretty.

That access business did almost $2 billion in revenue last year–about half its sales–and it represented almost all its profits.

In contrast, AOL’s advertising business lagged, dropping hugely over the last several quarters.

Still, Armstrong has laid out a strategy that has included, in part:

Being a new kind of content giant, via a series of branded niche media sites, with about 500 full-time writers and editors and 1,500 freelancers; selling premium display advertising on these sites and strengthening its third-party self-service ad network business; finding a way to use its communications properties to redistribute traffic to other properties in a kind of virtuous circle.

There are also local, analytical and venture elements. But–for all intents and purposes–Armstrong’s plan is a content-and-advertising model, supported for now by the dwindling piles of cash from the access business.

That’s why, of course, costs are the next item on Armstrong’s to-do list.

“The cost structure is the last part of what was going to be dealt with, as Tim has told everyone,” said one person close to the situation about the former Google (GOOG) exec. “But, if it is slash-and-burn only, that would be pretty short-sighted.”

Perhaps, except that it is that exact tactic that has been business-as-usual at AOL for far too long.

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